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Comment by oisino | Hacker News Reader

Having friends who have had startups that relied on contractors the death blow is being forced to treat contractors as employees. The mass market model doesn't work when you have to charge 40% more just to cover the additional costs in benefits, overtime, taxes, hr etc. link to good article of friend who experienced this in his startup https://medium.com/@kaleazy/theres-no-magic-in-venture-backe... So the real question from all this bad press will it sway states and cities to start forcing uber to make this change? If so it will definitely hamper who they can service and their valuation.

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> The mass market model doesn't work when you have to charge 40% more just to cover the additional costs in benefits, overtime, taxes, hr etc.

Perhaps there was no model to begin with then, no? That 40% doesn't magically disappear. The cost is borne by the "contractors" themselves. In software development that usually means charging a lot more than a salaried employee costs because you aren't guaranteed work all the time and you need to cover your own benefits.

Building a business on forcing people into slavery would be profitable in some circumstances. Building a business on finding free gold coins buried in the ground would definitely be profitable. Doesn't mean you have a sustainable business.

If there are enough people willing to work as contractors, then there is a business model.

Oftentimes they're just exploiting uneducated and naive people who work these jobs because they don't know any better, not because they want to be contractors.

1099 costs breakdown: 63.2% Caregiver, 26.5% Margins, ~10% Misc

W2 costs breakdown: 56.8% Caregiver, 1% Margins, 18% Onboarding, 7% Recruiting, 3% Merchant Fees, 15% (Benefits, Taxes, Benefits).

If we take their data at face value, it looks like about 28% of the cost is Cruft picked up from the W2 model and is not benefiting either the company or the caregiver.

Cruft picked up from the W2 model and is not benefiting either the company or the caregiver

Yes, I imagine those poor, hapless caregivers saying things like "My lifelong dream has been to work 80 hours a week with no overtime and no health insurance, and this damn nanny-state government is getting in the way of my achieving it!"

There's a reason why the 1099 racket is getting shut down, and it's because abused and exploited workers don't have that as their lifelong dream.

This does not include the health insurance / overtime payments. The 28% is vendor fees, onboarding and recruiting costs.

I find your lack of regard for the well being of Uber drivers, and workers generally, concerning. I understand that the startup funding model you are focused on may not be as lucrative for founders and their startup backers if they must begin to adequately take into account the well being of their employees, but workforce compensation and well being cannot continue to be ignored and even actively fought against as is the case with Uber.

He spends the article basically grousing about

   The additional costs of payroll taxes, overtime, paid sick leave, minimum 
   wage regulations, benefits and health insurance, unemployment tax, workers 
   comp insurance, and potential for lawsuits in a highly litigious industry 
   put us in heavy handcuffs.

God forbid he treats employees like people who may get sick and need to see a doctor, or who get minimum wage, or take responsibility for their screwups, or ...

Basically, he had a good time when he could pretend employees were contractors, pay his employees 1099, and compete against people paying W2, but the party ended.

Little is known that recently FedEx was forced to convert their contractor delivery drivers to employees. The same way it may work out for Uber.

Could there be a similar path for Amazon wrhse workers to go down eventually?

amazon will just speed up their automation. uber can't do that as easily with cars on public roads.

Well, if they did become employees, I guess they could opt to have an election to decide on unionization or not and then have the union vote on any opportunity to automate... where they most likely would pass on that --unless AMZN undermines union cohesion by having robots pay double union dues.

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